An asset was acquired on August 1, 2018, for $22,000 with an estimated 5-year life and $2,000 residual value. The company uses straight-line depreciation. Calculate the gain or loss if the asset was sold on April 30, 2020, for $13,000. Partial-year depreciation is calculated based on the number of months the asset is in service.
A) $3,000 gain.
B) $2,000 loss.
C) $6,000 gain.
D) $4,000 loss.

Question

Quizplus · Accepted Answer

Depreciation = ($22,000 ? $2,000)/60 months = $333.33/month.
Accumulated depreciation = $333.33 × 21 months = $7,000. [Alternatively, depreciation is ($22,000 ? $2,000)/5 years = $4,000/year and 1.75 years have passed = $7,000 accumulated depreciation.]
Book value = $22,000 - $7,000 = $15,000. Loss = $13,000 ? $15,000 = ($2,000).

An Asset Was Acquired on August 1, 2018, for $22,000